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Family-owned companies see allure in take-private deals

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Apr 17, 2024
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Illustration: Gabriella Turrisi/Axios

More family-owned consumer and retail businesses are considering taking their companies private as they look to step out of the public (market) eye.

Why it matters: Increasing regulatory and reporting requirements, on top of volatile markets, create perfect exit conditions for family-owned companies.

What they're saying: "Public markets aren't what they're cracked up to be," Foley & Lardner partner Steve Barth says.

  • It can cost more to comply with regulations and disclosure requirements, and your capital, financial and political spending is scrutinized.
  • Going private at a fair price where they can "get away from living their life in a fishbowl is pretty attractive."

Yes, but: A family looking to sell could signal that there are cracks in the business, causing "a ripple in the marketplace."

Reality check: The upsides of public equity include liquidity, and the financial flexibility to use stock for acquisitions though fairly rare for family businesses, Barth says.

Zoom out: Globally, there were 224 take-private transactions last year, up from 191, according to Dealogic data.

  • Leading the charge are Blackstone, Thoma Bravo, CPP Investments, Apollo Global Management and KKR, per Dealogic.

Zoom in: Family offices, which are increasingly coming into the deal fray, stand out to family-owned businesses.

  • "Culture is almost everything when it comes to selling a founder-developed or family-owned business," Barth says.
  • They want to keep their legacy and culture in place, and it isn't all about the money, Barth says.
  • Family offices can be very sophisticated, with many professionals involved, but still feel like family, Barth says.

Between the lines: Private equity could be a contender too if they agree to preserve some of the culture and "act like a family office," Barth adds.

  • Private equity activity has also been boosted by a rise in the private credit markets, in addition to the traditional debt market.

State of play: Last week, L'Occitane owner Reinold Geiger made a second bid to take the skin care company private with the financial help of Blackstone.

  • The family behind shoemaker Tod's — the Della Valle family — is vying to take the company private again, this time enlisting the help of private equity firm L Catterton.
  • Last month, the founding family behind Nordstrom was also reportedly seeking a take-private deal, hiring Morgan Stanley and Centerview Partners to gauge interest.

What we're watching: If Democrats sweep in November, a capital gains tax increase could be back on the table.

  • "Then it will be a mad rush for the exits," Barth says.
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